That's exactly my point, though. What happens on-chain doesn't really matter when you can circumvent it in real life. If I start sending people to jail for using blockchain, nobody's going to want your bitcoin, no matter how irreversible the transactions are.

You're trying to be pedantic about a line which doesn't exist. No form of censorship has ever been perfect at preventing all activity — the likelihood of punishment is what makes it effective. Newspapers won't cover a story which they expect to be punished for, people will say things in private rather than in the street, etc. all despite technically having the option to shout something on the street. It turns out that being able to say “this is punishment, not censorship!” afterwards while the police are getting out the electrodes isn't very appealing to most people.

In this case, you need to think more carefully about the various ways in which activity can be deterred or prevented:

1. Blockchains give a permanent, public record. That has a chilling effect on anything potentially censorable because while the government might need a witness to know that you dropped $50 in the Wikileaks jar, they can at their leisure tell that you did so with cryptocurrency. 2. “But it's [pseudo-]anonymous!” — if any part of your transaction network becomes known to them, they can link that wallet to you. Better hope that you, your friends, and every business you interact with have perfect opsec and all of your software is flawless about masking its network traffic. 3. Most people use exchanges and buy from businesses which have a legal presence in a country which is part of international agreements. That means that when, say, the US puts someone on a sanctions list transactions might be blocked outright for people using a bank which checks the blacklist and refuses to take on liability for prohibited activity, but if successful those coins have less value because fewer people are going to buy them in return and they'll pay less. You can probably get Bitcoin to Wikileaks, for example, but that Wikileaks wallet holder is going to have a hard time turning it into useful currency which will be accepted by legitimate businesses in most of the world. Paying to launder it is possible but unreliable and you'll be running afoul of the same infrastructure used to track organized crime, and presumably paying similar rates to do so.

sure they can take the money back. they just make wikileaks pay them, or else they press charges against wikileaks for holding onto the proceeds of crime or whatever.

even if you're insisting that censorship has to be preemptive, then the chilling effect from these arrests still counts.